Tuesday, June 08, 2004

The "handbag" ploy

Demonstrating yet again his lack of campaigning skills, Michael Howard is continuing his maladroit Euro-election campaign by invoking the spirit of Margaret Thatcher.

In his recent Southampton speech, click here, he told his hand-picked audience of party workers that "Lots of people think that you can only do business with Europe in one of two ways. Either you've got to hand over ever more powers. Or you have got to give up altogether."

"But I take a different view. And so did Mrs Thatcher," Howard continued. "She was told there was nothing that could be done about the fact that Britain paid more than her fair share of the total EU budget. People said to her 'you'll never get our money back from Europe'."

But, according to the Howard version of history, "…she wasn't having that. She said no…and look what happened - Britain got her rebate which is still being paid to this day."

By invoking Thatcher, Howard is of course trying to convey the impression that, like Thatcher, he can go storming off to Brussels and bang his (metaphorical) handbag on the table and get his way. All it will take, he implies, is a little bit of firmness, and the "colleagues" will roll over and give him exactly what he wants.

What is particularly dismal about this fantasy, though, is the way it completely misrepresents history. Yes, there is no question that Thatcher did hold out for the British rebate, famously in popular myth, going to Brussels and "handbagging" the opposition.

But the reality is different. For a start, she had right on her side, which even the "colleagues" acknowledged. The financial settlement agreed by Heath on our accession was outrageously one-sided, with Britain set by 1980 to become the highest contributor to the community budget despite being seventh (of nine) in the per capita GDP league.

In fact, had events been less kind to Thatcher, and a Conservative government had not been elected, a Labour prime minister would have been "batting for Britain" in exactly the same way. Our budget payments were entirely unsustainable.

But what particularly gave Thatcher the edge – and would have been useful to anyone negotiating for Britain - was one central point. Costs of running the CAP were spiralling out of control and the Community was on the verge on bankruptcy, unable to pay its bills. Supported by Kohl and Mitterand – the latter desperately needing to keep his politically strong farmers happy - the "colleagues" were frantic to get agreement to an increase in the Community's "own resource", mainly though an increase in the percentage of VAT paid to the budget. Mitterand wanted a hike to 1.6 percent.

Their problem was that changes to the "own resource" required unanimous agreement, giving Thatcher the whip hand. Against a deteriorating financial situation, which had to be resolved, all she had to do was refuse to agree a new budget settlement until the colleagues had also agreed to a rebate.

What became known as the "Bloody British Question" nevertheless dominated Community politics from March 1979 until 1984, when it was finally settled at the notorious Fontainebleau Council. There, Thatcher famously secured a rebate of 66 percent on the VAT payment made to the Community budget. But this was at the cost of agreeing to an additional "own resource" whereby each member state would make an additional payment representing a proportion of its Gross National Product.

This, in turn, created new budgetary imbalances, which had to be corrected, so this was far from the end of the story. What happened then is taken directly from The Great Deception, by Christopher Booker and myself (pp. 193-4).

"Tied up in the small print was the establishment of a 'correction mechanism' for dealing with the continuing budgetary imbalances. Its complexity was such that, according to Hugo Young, it was 'outside the comprehension of every normal European citizen'. Even the Commission itself was to admit that it 'inhibited transparency in the financial relationships between the Member States and the Community budget'."

"In 1988 at the Brussels European Council, further revisions were made to the funding system where what became known as the 'Own Resources Decision' was made... These, in turn, created new distortions and required a new mechanism to calculate Britain's rebate. So complicated was the calculation that, according to the Commission's own reckoning, it produced the somewhat surprising result that the United Kingdom appears to participate in the financing of its own rebate (our emphasis)."

"While the Commission suggested that this 'self-financing' involved only 'very small amounts', the cumulative effects of the Fontainebleau agreement and the Brussels 'adjustment' were to be substantial. They created a situation whereby, whenever the UK applied for funds over and above a threshold level agreed in 1984, the Commission, through its 'correction mechanism', was (and is) able to 'claw back' a substantial proportion of the funds paid. By 2003 this equated to 71 percent."

"Because this meant that, in applying for certain funds from Brussels, the Treasury would end up paying for most of them itself, the British government decided that, having won her rebate, Britain should take maximum advantage from it. This in turn meant that, wherever possible, the UK would refuse to apply for such funds, even though other member states were doing so. This further meant that other countries were able to draw on considerably more money for their farmers from Brussels than was available to British farmers, whose ability to match the prices of their EEC competitors was thus reduced."

"By 2003, this would have become a significant contributory factor in the collapse of British agriculture. Thatcher’s 'victory' turned out to be a very mixed blessing." Putting it more crudely, despite Thatcher having all the aces, she was still hoodwinked, and Britain is still paying the cost.

But the really interesting thing is that a copy of The Great Deception was sent, free of charge, to every single MP, including Howard. One has long ceased expecting politicians to read books, but at least one of his ghastly teenage scribblers in Central Office could have read the copy - if indeed they can read - and corrected the myth about the use of Thatcher's "handbag".

Translated into the current situation, with Howard seeking such things as the repatriation of fishing policy, he holds none of the cards that were available to Thatcher. His only bargaining counter is the threat, unequivocally made, to act unilaterally in the event that there is no agreement. This, he and the Tory leadership seem increasingly reluctant to do.

Thus, when Howard says, "…the truth is that if you stand up for what you believe in, you can get things done in Europe," he speaks not the truth but simply transparently hollow rhetoric. And too many people now recognise it for what it is. That is why the Conservatives are going to get "creamed" in the Euros.